2018–2019 Grain Financial Protection Board annual report
1. Message from the chair
As the chair, on behalf of the Grain Financial Protection Board (GFPB), I am pleased to present to you the annual report for the year ending March 31, 2019.
The vision of the board is to protect the financial interests of Ontario producers who have sold grain corn, soybeans, wheat, and canola and owners who stored grain with elevator operators. This is directly linked to one of the ministry's goals of ensuring the sustainability of agriculture in Ontario.
The Grain Financial Protection Program (GFPP) was introduced in the mid-1980's following a series of grain elevator bankruptcies. GFPP consists of two components which are:
- The annual licensing of grain dealers and elevator operators under the Grains Act. Agricorp, is under contract with OMAFRA to administer the program.
- The administration of the funds. The board is responsible for the administration of the funds. All income held in the funds comes from producer check-off fees and investment income. The purpose of the funds is to provide producers/owners with financial compensation in the event that a dealer or elevator defaults on their obligation or if there is a storage shortfall.
The board continued to focus on managing the funds to ensure sustainability and the ability to provide farmers with an effective risk management tool.
In May 2018, eight claim applications were submitted from producers regarding non-payment from a licensed dealer. The board reviewed, discussed and made decisions on the claims presented. Decision letters were sent to the claimants and defaulters within the targeted timelines.
The board conducted an annual review on the performance of the funds. The balances and growth rates are compared to the recommendations in the 2011 and 2016 actuarial reports. As of 2017–18 all of the funds have met the established target balances.
The board worked with the minister throughout the year on appointing members to the board. In 2018–19, one member was reappointed for a three year term and one member's term expired whom fulfilled their tenure. The board has submitted recommendations to the minister for consideration for any vacancies and is working actively to fill any in a timely manner. By continuing to work collaboratively with the ministry, the board will remain effective in its operations and ensure appropriate governance is in place to fulfill its mandate.
Looking forward, the board will continue to focus on ensuring the sustainability of the funds as we continue to meet our mandate.
Respectfully submitted,
Dave Buttenham
Chair, Grain Financial Protection Board
2. Governance
The Grain Financial Protection Board (board) was established in 1985 and is classified as a board-governed provincial agency under the Agencies and Appointments Directive (AAD). The board under the AAD, "administers funds or other assets for beneficiaries named under statute".
The board members are accountable to the Minister of Agriculture Food and Rural Affairs (the minister), through the chair, for setting goals, objectives, and the strategic direction for the board. It operates under the authority of the Farm Products Payments Act (FPPA) and in accordance with the Memorandum of Understanding (MOU) between the minister and the chair.
The board's mandate, strategies and activities have always been focused on prudent management of the funds to ensure financial compensation is available to grain corn, soybean, wheat, and canola producers/owners when required. The board's mandate of administering the funds, investigating, granting or refusing claims, and recovering money is directly linked to one of the ministry's goals of ensuring the sustainability of agriculture in Ontario.
Memorandum of Understanding
A memorandum of understanding (MOU) reflects the relationship between the Grain Financial Protection Board and Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) and establishes the accountability framework between the minister and the chair. The MOU outlines the responsibilities between the minister, the chair, the deputy minister and the board of directors as well the administrative, financial, and auditing arrangements with OMAFRA.
With respect to the MOU under the Agencies and Appointments Directive (AAD), in normal course of a change in minister or chair, MOU's must be updated as necessary, and signed by the new minister and chair, within 180 days. A six month extension was provided to this requirement timeline for renewing or affirming MOU, extending this requirement to June 2019. In June of next fiscal, it is anticipated that the chair and the minister will affirm the continued use of the existing MOU. The MOU will be effective until it is revoked or a new MOU is signed by the Parties.
3. Board objectives and activities
The board's primary focus is on the prudent management of the funds and preparing for claims when they occur. The board remains current on the claims procedure and is prepared to adjudicate claims when required. New board members complete claims adjudication training which includes an overview of the claims adjudication guidelines. The board makes decisions on claims based on the evidence and the law and, if applicable, payments to producers and owners are made after the board has approved a claim.
Mandate
The board is responsible to the minister and is constituted under the authority of the Farm Products Payments Act (FPPA) and its regulations:
- Ontario Regulation 70/12: Payments From Funds For Grain Producers
- Ontario Regulation 321/11: Fees Payable to Boards
The board's legislative mandate is outlined in section 4 (1) of the FPPA as:
It is the function of a board and it has power,
- to administer its fund
- to investigate all claims made to it under this Act and to determine the extent of their validity
- to grant or refuse the payment of claims or any part thereof and determine the amounts and manner of payment
- to recover any money to which it is entitled under this Act by suit in a court of competent jurisdiction or otherwise
Business plan
To assist the board with achieving their mandate, they have established goals with corresponding objectives and activities. For 2018–19, the board established the following five goals which are reported on below:
- Long-term sustainability of the funds: The board has hired Agricorp for the day-to-day administration of the funds; however, the board is ultimately responsible for the oversight and management of the funds. The board annually measures the performance of the funds against established targets. The board will request actuarial reviews on the funds periodically or as required and they will only invest the funds in instruments that are approved in the MOU. The board has an established statement of investment policy that is reviewed annually, and it also reviews financial statements yearly. In 2018-19 the board directed financial services to have separate bank accounts for each type of investment for each fund as well as to update the accounting policies regarding revenue recognition.
- Maintain an adjudication process that is simple, fair and accessible with minimal delays: The board has approved claim adjudication guidelines and has established operational procedures to assist with the processing of claims. These activities will assist the board to ensure that the adjudication process is fair and has minimal delays. In 2018–19 the board received and made decision on eight claims from producers. See page 12 for details.
- Ensure agreements and directives are understood and documentation required under the MOU is in place: The board reviews the documentation required under the MOU to ensure that it is both understood and that the appropriate documentation is on file to remain in compliance with the MOU. Legal counsel is available to assist the board with any needed agreements and counsel regarding claims as required. The board met all obligations and timelines under the AAD. See page 10–11 for details.
- Ensure a high performing board: The board regularly reviews tenures of members and works with OMAFRA and stakeholder groups to seek recommendations of qualified candidates for appointments to the board. The board also maintains an orientation manual and provides new members with training. This year, one member was reappointed and one member's term expired fulfilling their tenure. See page 7 for a list of board members.
- Consultation with industry stakeholders: The board participates in meetings with stakeholders as required, generally every two to three years or more frequently, as needed. A stakeholder meeting was held on July 11, 2018.
Board key activities
The board held six meetings over the 2018–19 fiscal year that focused on:
- adjudicating claims
- reviewing quarterly financial statements
- business planning and risk assessment
- the appointment process management
- discuss claim process and possible improvements
- staying current regarding stakeholder issues (stakeholder meeting held July 11, 2018)
- reviewing and updating the boards statement of investment policy
Board staff
The board does not have staff. In 2017–18, the board entered into a multi-year service agreement with Agricorp for Governance, Secretariat and Financial Support Services which expires in 2019–2020. There is an option to extend the agreement for two additional one year periods.
Legal services and investigative services
As per the MOU (s.15.5), Legal services have been retained through Ministry of the Attorney General, Legal Services Branch, OMAFRA. The assigned lawyer provides the board with advice regarding agreements, claims, legal assistance in any judicial reviews of board decisions, and regarding the recovery of monies owed to the board, and also assists in the continual education of board members. The Regulatory Compliance Unit of OMAFRA provides investigative services for the board upon the board's request for investigation services.
4. Board of directors
Board structure
The Farm Products Payments Act (FPPA) requires that the board be composed of no fewer than five members appointed by the minister. board members are appointed for terms up to three years and may be reappointed
The membership of the board has been traditionally comprised of nominees from each of the Ontario Canola Growers' Association, the Ontario Agri Business Association and the Grain Farmers of Ontario. Both the chair and the vice chair position are filled by the minister's appointment.
The board continued to work collaboratively with the minister and stakeholder groups to fill vacant positions.
There was one member reappointed in 2018–19 and one member who fulfilled their tenure. The board continues to monitor its vacancies and act proactively to make recommendations to ensure it has the appropriate governance in place to fulfill its mandate.
Listed below are the appointees for the fiscal year 2018–19 (as of March 31, 2019). The board has submitted recommendations to the minister for any vacancies.
| Member Name | Position | Tenure |
|---|---|---|
| Dave Buttenham | Chair | 22-Mar-2011 – 17-Sept-2020 *appointed chair Sept 2017 |
| Henry Van Ankum | Vice chair | 19-Apr-2012 – 30-Aug-2019 *seeking reappointment |
| Darcy Oliphant | Member | 30-July-2011 – 29-July-2020 *reappointed in July 2017 |
| Mark Brock | Member | 22-Aug-2012 – 22-Aug-2018 *fulfilled term Aug 22, 2018 |
| Markus Haerle | Member | 29-Jun-2015 – 1-Jan-2022 *reappointed in January 2019 |
| Jennifer MacDonald | Member | 13-Mar-2017 – 12-Mar-2020 |
| Lindsay Menich | Member | 27-Oct-2017 – 26-Oct-2020 |
| Nadine Schwandt | Member | 27-Oct-2017 – 26-Oct-2020 |
| Chuck Amyot | Member | 25-Jan-2018 – 24-Jan-2021 |
| Ron Campbell | Member | 29-Jan-2018 – 28-Jan-2021 |
5. Operational performance
The board's operational performance is focused on effectiveness, efficiency, and reliability.
The Office of the Auditor General conducts an annual audit of the accounts and financial transactions of the board. The audit of 2018/19 fiscal year was conducted in October 2019 and showed that all the funds (grain corn, soybean, wheat and canola) continue to meet the minimum target balances as outlined in the 2011 and 2016 actuarial report.
The board annually reviews their established policies to ensure they are current. Minimal changes (not material) to the established policies were recommended this year. The board also approved updates to their investment policy (statement of investment policy), ensuring alignment with the MOU.
A total of eight claim applications were submitted in 2018/19 from producers wishing to claim for potential payment from the funds. The board reviewed, discussed and made decisions on the claims presented based on grounds set out in O. Reg. 70/12. Decision letters were sent to the claimants and defaulters with no payments paid from the funds. The board completed a debrief from the claims adjudication process as an opportunity to determine areas for possible improvement for future years.
The board conducted an actuarial review on the funds in November 2016 and continues to consider the results and recommendations of this review during this business plan period and will to continue to monitor all the funds annually and make the appropriate changes as needed. The next review is scheduled for approximately 2021/22 fiscal year.
In 2018-19 the board reviewed and approved a recommendation from Agricorp's financial services to have separate bank accounts for each type of investment for each of the funds. Separating the accounts removes the requirements of manual tracking and calculating for investments and will allow financial services to be more efficient and effective. The board also approved a revision to the wording of the GFPB accounting policy (revenue recognition policy) based on recommendation from Agricorp's Financial Services.
Over the past year, the board implemented its business plan and has delivered on its goals and objectives. The table on page 9 summarizes the board's performance targets and results. The board met all of its objectives.
The GFPB remains compliant with directives, policies and agreements including meeting AAD requirements for submission of the MOU, business plan and annual report to the minister. These documents are translated and posted publicly by OMAFRA on their website.
6. Performance measures and targets
The board's principal activities are to manage the funds effectively and prepare for claims when they occur.
The board's principal objectives for the period ending March 31, 2019 were as follows:
- Maintain a solvent compensation fund managed in the interest of grain producers.
- Conduct adjudicatory hearings and issue decisions in a fair and timely manner.
- Grant or refuse claims and seek recovery of amounts paid.
- Ensure that the board is compliant with directives, policies, and agreements.
The following indicators define the outcomes the board committed to achieving. These indicators are the basis for measuring and evaluating impact.
| Performance measure | Baseline | Target 18/19 | Actual 18/19 | Target 20/21 | Target 18/19 | Target 21/22 |
|---|---|---|---|---|---|---|
| Annual financial audit achieves an unqualified audit opinion in accordance with Canadian generally accepted accounting principles | Unqualified | Unqualified | Achieved | Unqualified | Unqualified | Unqualified |
| Grain corn target fund balance | Minimum fund balance $4,600,000 maintained | Minimum fund balance $4,600,000 maintained | Achieved balance — $6,047,336 | Minimum fund balance $4,600,000 maintained | Minimum fund balance $4,600,000 maintained | Minimum fund balance $4,600,000 maintained |
| Wheat target fund balance | Minimum fund balance $2,200,000 maintained | Minimum fund balance $2,200,000 maintained | Achieved balance — $3,998,313 | Minimum fund balance $2,200,000 maintained | Minimum fund balance $2,200,000 maintained | Minimum fund balance $2,200,000 maintained |
| Canola target fund balance | Minimum fund balance $900,000 maintained | Minimum fund balance $900,000 maintained | Achieved balance — $1,043,704 | Minimum fund balance $900,000 maintained | Minimum fund balance $900,000 maintained | Minimum fund balance $900,000 maintained |
| Soybean target fund balance | Minimum fund balance $4,400,000 maintained | Minimum fund balance $4,400,000 maintained | Achieved balance — $5,396,079 | Minimum fund balance $4,400,000 maintained | Minimum fund balance $4,400,000 maintained | Minimum fund balance $4,400,000 maintained |
| Receipt and review fund financial statements from Agricorp | Quarterly | Quarterly | Achieved | Quarterly | Quarterly | Quarterly |
Minimum target fund balances are maintained as per actuarial review. Note soybean fund is the only one that has an annual growth target due to the fact that it had been below the minimum fund balance the past few years.
| Performance measure | Baseline | Target 18/19 | Actual 18/19 | Target 19/20 | Target 20/21 | Target 21/22 |
|---|---|---|---|---|---|---|
| Claims processed with minimal delays | Claimants notified within 2 calendar days, dealer and elevators within 4 days of receipt of claim | Claimants notified within 2 days, dealer and elevators within 4 days of receipt of claim | Achieved — all claimants notified within 2 days, dealers and elevators notified within 4 days of receipt of claim | Claimants notified within 2 days, dealer and elevators within 4 days of receipt of claim | Claimants notified within 2 days, dealer and elevators within 4 days of receipt of claim | Claimants notified within 2 days, dealer and elevators within 4 days of receipt of claim |
| Claims are adjudicated fairly | Claims are reviewed individually, and follow adjudication guidelines established | Claims are reviewed individually, and follow adjudication guidelines established | Achieved — all claims were reviewed individually and followed claims adjudication guidelines | Claims are reviewed individually, and follow adjudication guidelines established | Claims are reviewed individually, and follow adjudication guidelines established | Claims are reviewed individually, and follow adjudication guidelines established |
| Claimants received notification of board decision | Within 10 calendar days of a board decision | Within 10 calendar days of a board decision | Achieved — all claimants notified of board decision within 10 days of board decision | Within 10 days of a board decision | Within 10 days of a board decision | Within 10 days of a board decision |
| Performance measure | Baseline | Target 18/19 | Actual 18/19 | Target 19/20 | Target 20/21 | Target 21/22 |
|---|---|---|---|---|---|---|
| Claims are reviewed to determine their validity | Board refers to FPPA and uses legal counsel as required to determine validity of claims | Board refers to FPPA and uses legal counsel as required to determine validity of claims | Achieved — eight claims reviewed in 2018–19 | Board refers to FPPA and uses legal counsel as required to determine validity of claims | Board refers to FPPA and uses legal counsel as required to determine validity of claims | Board refers to FPPA and uses legal counsel as required to determine validity of claims |
| Recover any money to which the board is entitled to under the FPPA | Legal counsel is consulted when proceeding with any recovery action | Legal counsel is consulted when proceeding with any recovery action | Achieved — No pay-outs were made from the funds in 2018/19 to recover | Legal counsel is consulted when proceeding with any recovery action | Legal counsel is consulted when proceeding with any recovery action | Legal counsel is consulted when proceeding with any recovery action |
| Performance measure | Baseline | Target 18/19 | Actual 18/19 | Target 19/20 | Target 20/21 | Target 21/22 |
|---|---|---|---|---|---|---|
| Updated MOU in place | Updated as per the Agencies and Appointments Directive section 1.9.1 | Updated as per the Agencies and Appointments Directive section 1.9.1 (if applicable). | A six month extension was provided to this requirement timeline for renewing or affirming MOU, extending this requirement to June 2019. MOU to be re-affirmed by June 29, 2019 (to be reported on in the 19/20 fiscal year). | Updated as per the Agencies and Appointments Directive section 1.9.1 (if applicable) | Updated as per the Agencies and Appointments Directive section 1.9.1 (if applicable) | Updated as per the Agencies and Appointments Directive section 1.9.1 (if applicable) |
| Submit annual report to minister | Annually | Within 90 days of the agency's receipt of the audited financial statement. | Achieved — met AAD requirement. Report was submitted to minister through the OMAFRA liaison on October 9, 2018 within 90-days of completing the financial audit (Sept. 17, 2018) meeting the AAD requirements. | Within 90 days of the agency's receipt of the audited financial statement meeting AAD requirements. | Within 90 days of the agency's receipt of the audited financial statement meeting AAD requirements. | Within 90 days of the agency's receipt of the audited financial statement meeting AAD requirements. |
| Submit business plan to minister | Annually | March 2018 | Achieved. Submitted 2019-2022 Business Plan on February 28, 2019. | March 2019 | March 2020 | March 2021 |
| Submit quarterly risk assessment report to OMAFRA | Quarterly | Quarterly | Achieved. Submitted to ministry liaison. | Quarterly | Quarterly | Quarterly |
| Submit agency attestation to minister — new requirement as of 2015/16 | Annually | Annually | Achieved. Submitted to Agency liaison on March 28, 2019. | Annually | Annually | Annually |
7. Analysis of financial performance
The Office of the Auditor General of Ontario finalized an audit of the 2018–19 financial statements in October 2019 and the board submitted the annual report to the minister shortly there after. The GFPB's fiscal year is April 1 to March 31.
Annually, the board conducts a full review of their investment strategies, including the investigation of alternate strategies, to ensure that returns are maximized within the investment framework. The board conducted a review of their investments and made changes to ensure that they are maximizing their return on investments. The board will continue to monitor the annual growth rate of all four funds.
This year, the interest earned on investments was higher by 72 basis points or 45%. The average return on investment in 2018/19 was 2.31% as compared to 1.59% in 2017/18. This is due to much of the investment portfolio being invested into higher yielding GICs.
In 2018/19, the board met and made decisions on eight claim applications and no pay-outs were made from the funds.
Under the June 2017 MOU between the minister and the board chair (S 13.6) , the GFPB shall pay for the cost of determining financial responsibility, provided that any annual payment due does not exceed thirty percent (30%) of total annual licensing costs. This was an increase in board expenses as of 2017/18 fiscal year and onward in the budget.
| Fiscal year | Budget 2017/18 | Actual 2017/18 | Budget 2018/19 | Actual 2018/19 |
|---|---|---|---|---|
| Fees | $375,000 | $426,022 | $375,000 | $486,063 |
| Investment interest | $218,655 | $238,921 | $252,672 | $371,267 |
| Claim recoveries | $0 | $29,133 | $0 | $0 |
| Total revenue | $593,655 | $694,076 | $627,672 | $857,330 |
| Fiscal year | Budget 2017/18 | Actual 2017/18 | Budget 2018/19 | Actual 2018/19 |
|---|---|---|---|---|
| Claims | $263,000 | $29,133 | $263,000 | $0 |
| Governance/secretariat services | $47,000 | $17,204 | $47,000 | $26,177 |
| Financial services | $33,000 | $20,332 | $33,000 | $21,519 |
| Professional fees (actuarial) | $0 | $0 | $0 | $0 |
| Financial responsibility review | $182,500 | $198,276 | $181,900 | $187,169 |
| Total expense | $525,500 | $264,945 | $524,900 | $234,865 |
| Fiscal year | Budget 2017/18 | Actual 2017/18 | Budget 2018/19 | Actual 2018/19 |
|---|---|---|---|---|
| Net balance (total revenue - expenses) | $97,948 | $429,131 | $102,772 | $622,465 |
| Fund balance beginning of year | $15,433,836 | $15,433,836 | 15,862,967 | $15,862,967 |
| Adjustment on the adoption of the financial instrument standard | $0 | $0 | $0 | $0 |
| Fund balance end of year | $15,531,784 | $15,862,967 | $15,965,739 | $16,485,432 |
| Fiscal year | Budget 2017/18 | Actual 2017/18 | Budget 2018/19 | Actual 2018/19 |
|---|---|---|---|---|
| Cost of determining financial responsibility | $169,800 | $184,705 | $169,200 | $171,569 |
| FRRC | $12,500 | $13,280 | $12,500 | $15,357 |
| Other administration | $200 | $291 | $200 | $243 |
| Total | $182,500 | $198,276 | $182,500 | $187,169 |
Appendix 1: History of claims (as of March 31, 2019)
| Fiscal year (April 1 – March 31) | # of claims reviewed/ made decision on | # of claims paid | Total claim amount paid from Funds | Dollars recovered to the Funds | Amount paid out by the Funds |
|---|---|---|---|---|---|
| 1985–1986 | 264 | 92 | $1,059,602.00 | $312,699.00 | $746,903.00 |
| 1986–1987 | 7 | 6 | $27,603.04 | $26,280.00 | $1,350.04 |
| 1987–1988 | Nil | Nil | N/A | N/A | N/A |
| 1988–1989 | 2 | 2 | $15,806.69 | $0.00 | $15,806.69 |
| 1989–1990 | 13 | 13 | $249,748.02 | $0.00 | $249,748.02 |
| 1990–1991 | 20 | 18 | $279,367.75 | $2,000.00 | $277,367.75 |
| 1991–1992 | Nil | Nil | N/A | N/A | N/A |
| 1992–1993 | 11 | 11 | $266,814.40 | $40,000.00 | $226,814.40 |
| 1993–1994 | 27 | 24 | $270,500.59 | $0.00 | $270,500.59 |
| 1994–1995 | 5 | 1 | $15,993.09 | $8,000.00 | $7,993.09 |
| 1995–1996 | Nil | Nil | N/A | N/A | N/A |
| 1996–1997 | 51 | 45 | $434,282.39 | $0.00 | $434,282.39 |
| 1997–1998 | Nil | Nil | N/A | N/A | N/A |
| 1998–1999 | Nil | Nil | N/A | N/A | N/A |
| 1999–2000 | 21 | 21 | $57,786.98 | $0.00 | $57,786.98 |
| 2000–2001 | Nil | Nil | N/A | N/A | N/A |
| 2001–2002 | Nil | Nil | N/A | N/A | N/A |
| 2002–2003 | Nil | Nil | N/A | N/A | N/A |
| 2003–2004 | 8 | 8 | $147,204.67 | $11,379.00 | $135,825.67 |
| 2004–2005 | Nil | Nil | N/A | N/A | N/A |
| 2005–2006 | Nil | Nil | N/A | N/A | N/A |
| 2006–2007 | Nil | Nil | N/A | N/A | N/A |
| 2007–2008 | Nil | Nil | N/A | N/A | N/A |
| 2008–2009 | 19 | 18 | $731,797.00 | $267,000.00 | $464,797.00 |
| 2009–2010 | Nil | Nil | N/A | N/A | N/A |
| 2010–2011 | Nil | Nil | N/A | N/A | N/A |
| 2011–2012 | 3 | 0 | $0.00 | $0.00 | $0.00 |
| 2012–2013 | Nil | Nil | N/A | N/A | N/A |
| 2013–2014 | Nil | Nil | N/A | N/A | N/A |
| 2014–2015 | Nil | Nil | N/A | N/A | N/A |
| 2015–2016 | 5 | 4 | $7,617.23 | $7,617.23 | $0.00 |
| 2016–2017 | Nil | Nil | N/A | N/A | N/A |
| 2017–2018 | 15 | 2 | $29,132.89 | $29,132.89 | $0.00 |
| 2018–2019 | 8 | 0 | $0.00 | $0.00 | $0.00 |
| Total | 479 | 265 | $3,593,283.74 | $704,108.12 | $2,889,175.62 |
Financial statements of the Grain Financial Protection Board (Funds for producers of grain corn, soybeans, canola, wheat) — year ended March 31, 2019
Management's responsibility for financial reporting
The accompanying financial statements have been prepared by management, in accordance with Canadian Public Sector Accounting Standards. Management is responsible for the accuracy, integrity and objectivity of the information contained in the financial statements. The financial statements include some amounts that are necessarily based on management's best estimates and have been made using careful judgment.
In discharging its responsibility for the integrity and fairness of the financial statements, management maintains financial and management control systems and practices designed to provide reasonable assurance that transactions are authorized, assets are safeguarded, and proper records are maintained. The systems include formal policies and procedures and an organizational structure that provides for appropriate delegation of authority and segregation of responsibilities.
The board of directors is responsible for ensuring management fulfills its responsibilities for financial reporting and internal control. The board meets regularly to oversee the financial activities and annually reviews the financial statements.
These financial statements have been audited by the auditor general of Ontario. The auditor general's responsibility is to express an opinion on whether the financial statements are fairly presented in accordance with Canadian Public Sector Accounting Standards. The independent auditor's Report, which appears on the following page, outlines the scope of the auditor general's examination and opinion.
Signed by:
Becky Philpott
Interim Chief Financial Officer, Agricorp
Theresa Moisan
Finance Manager, Agricorp
October 3, 2019
Independent auditor's report
To the Grain Financial Protection Board and to the Minister of Agriculture, Food and Rural Affairs
Opinion
I have audited the financial statements of the Grain Financial Protection Board (the funds for Producers of Grain Corn, Soybeans, Canola and Wheat) (the board), which comprise the statement of financial position as at March 31, 2019, and the statements of operations and fund balances, remeasurement gains and losses and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In my opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the board as at March 31, 2019 and the results of its operations, its remeasurement gains and losses and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.
Basis for opinion
I conducted my audit in accordance with Canadian generally accepted auditing standards. My responsibilities under those standards are further described in the auditor's Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the board in accordance with the ethical requirements that are relevant to my audit of the financial statements in Canada, and I have fulfilled my other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.
Other information
Management is responsible for the other information. The other information comprises the information, other than the financial statements and my auditor's report thereon, in the board's 2019 annual report. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon.
In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.
Responsibilities of management and those charged with governance for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the board's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the board either intends to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the board's financial reporting process.
Auditor's responsibilities for the audit of the financial statements
My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, I exercise professional judgment and maintain professional skepticism throughout the audit. I also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the board's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the board's ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor's report. However, future events or conditions may cause the board to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.
Susan Klein, CPA, CA, LPA
Assistant auditor general
October 3, 2019
Toronto, Ontario
The Grain Financial Protection Board (Funds for producers of grain corn, soybeans, canola, wheat)
Statement of financial position as at March 31, 2019
| Fiscal year | Grain corn 2019 | Grain corn 2018 | Soybeans 2019 | Soybeans 2018 | Canola 2019 | Canola 2018 | Wheat 2019 | Wheat 2018 | Total 2019 | Total 2018 |
|---|---|---|---|---|---|---|---|---|---|---|
| Cash | $309,239 | $288,951 | $431,831 | $579,488 | $52,571 | $79,956 | $287,968 | $312,904 | $1,081,609 | $1,261,299 |
| Short term investments (note 4) | $1,773,781 | $5,734,071 | $1,517,308 | $4,467,202 | $279,814 | $947,540 | $1,008,256 | $3,511,888 | $4,579,159 | $14,660,701 |
| Accounts receivable (note 3) | $460 | $495 | $14,110 | $21,857 | $1,094 | $199 | $2,226 | $4,379 | $17,890 | $26,930 |
| Total current assets | $2,083,480 | $6,023,517 | $1,963,249 | $5,068,547 | $333,479 | $1,027,695 | $1,298,450 | $3,829,171 | $5,678,658 | $15,948,930 |
| Long term investments (note 4) | $3,988,129 | N/A | $3,461,033 | N/A | $713,324 | N/A | $2,706,284 | N/A | $10,868,770 | N/A |
| Total assets | $6,071,609 | $6,023,517 | $5,424,282 | $5,068,547 | $1,046,803 | $1,027,695 | $4,004,734 | $3,829,171 | $16,547,428 | $15,948,930 |
| Fiscal year | Grain corn 2019 | Grain corn 2018 | Soybeans 2019 | Soybeans 2018 | Canola 2019 | Canola 2018 | Wheat 2019 | Wheat 2018 | Total 2019 | Total 2018 |
|---|---|---|---|---|---|---|---|---|---|---|
| Accounts payable | $24,273 | $33,115 | $28,203 | $40,327 | $3,099 | $4,298 | $6,421 | $8,223 | $61,996 | $85,963 |
| Total liabilities | $24,273 | $33,115 | $28,203 | $40,327 | $3,099 | $4,298 | $6,421 | $8,223 | $61,996 | $85,963 |
| Fund balances | $6,047,336 | $5,990,402 | $5,396,079 | $5,028,220 | $1,043,704 | $1,023,397 | $3,998,313 | $3,820,948 | $16,485,432 | $15,862,967 |
| Liabilities, fund balances, and accumulated remeasurement gains | $6,071,609 | $6,023,517 | $5,424,282 | $5,068,547 | $1,046,803 | $1,027,695 | $4,004,734 | $3,829,171 | $16,547,428 | $15,948,930 |
See accompanying notes to financial statements.
David Buttenham
Chair
Henry Van Ankum
Member
The Grain Financial Protection Board (Funds for producers of grain corn, soybeans, canola, wheat)
Statement of operations and fund balances - year ended March 31, 2019
| Fiscal year | Grain corn 2019 | Grain corn 2018 | Soybeans 2019 | Soybeans 2018 | Canola 2019 | Canola 2018 | Wheat 2019 | Wheat 2018 | Total 2019 | Total 2018 |
|---|---|---|---|---|---|---|---|---|---|---|
| Fees from producers | $7,782 | $6,444 | $357,424 | $303,126 | $8,396 | $5,703 | $112,461 | $110,749 | $486,063 | $426,022 |
| Investment income | $141,087 | $92,769 | $117,215 | $73,845 | $23,715 | $15,817 | $89,250 | $56,490 | $371,267 | $238,921 |
| Claim recoveries | N/A | $6,337 | N/A | $22,796 | N/A | N/A | N/A | N/A | N/A | $29,133 |
| Total revenue | $148,869 | $105,550 | $474,639 | $399,767 | $32,111 | $21,520 | $201,711 | $167,239 | $857,330 | $694,076 |
| Fiscal year | Grain corn 2019 | Grain corn 2018 | Soybeans 2019 | Soybeans 2018 | Canola 2019 | Canola 2018 | Wheat 2019 | Wheat 2018 | Total 2019 | Total 2018 |
|---|---|---|---|---|---|---|---|---|---|---|
| Financial responsibility review | $73,258 | $76,327 | $85,082 | $92,926 | $9,419 | $9,991 | $19,410 | $19,032 | $187,169 | $198,276 |
| Governance and Secretariat | $10,250 | $6,627 | $11,908 | $8,071 | $1,309 | $860 | $2,710 | $1,646 | $26,177 | $17,204 |
| Financial services | $8,427 | $7,832 | $9,790 | $9,538 | $1,076 | $1,017 | $2,226 | $1,945 | $21,519 | $20,332 |
| Claims paid | N/A | $6,337 | N/A | $22,796 | N/A | N/A | N/A | N/A | N/A | $29,133 |
| Total expenses | $91,935 | $97,123 | $106,780 | $133,331 | $11,804 | $11,868 | $24,346 | $22,623 | $234,865 | $264,945 |
| Fiscal year | Grain corn 2019 | Grain corn 2018 | Soybeans 2019 | Soybeans 2018 | Canola 2019 | Canola 2018 | Wheat 2019 | Wheat 2018 | Total 2019 | Total 2018 |
|---|---|---|---|---|---|---|---|---|---|---|
| Excess of revenue over expenses | $56,934 | $8,427 | $367,859 | $266,436 | $20,307 | $9,652 | $177,365 | $144,616 | $622,465 | $429,131 |
| Fund balances, beginning of year | $5,990,402 | $5,981,975 | $5,028,220 | $4,761,784 | $1,023,397 | $1,013,745 | $3,820,948 | $3,676,332 | $15,862,967 | $15,433,836 |
| Fund balances, end of year | $6,047,336 | $5,990,402 | $5,396,079 | $5,028,220 | $1,043,704 | $1,023,397 | $3,998,313 | $3,820,948 | $16,485,432 | $15,862,967 |
See accompanying notes to financial statements.
The Grain Financial Protection Board (Funds for producers of grain corn, soybeans, canola, wheat)
Statement of remeasurement gains and losses - year ended March 31, 2019
| Fiscal year | Grain corn 2019 | Grain corn 2018 | Soybeans 2019 | Soybeans 2018 | Canola 2019 | Canola 2018 | Wheat 2019 | Wheat 2018 | Total 2019 | Total 2018 |
|---|---|---|---|---|---|---|---|---|---|---|
| Accumulated remeasurement gains, beginning of year | N/A | $2,712 | N/A | $1,640 | N/A | $562 | N/A | $1,958 | N/A | $6,872 |
| Unrealized (losses) on investments | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| Remeasurement upon disposition | N/A | ($2,712) | N/A | ($1,640) | N/A | ($562) | N/A | ($1,958) | N/A | ($6,872) |
| Net change for the year | N/A | ($2,712) | N/A | ($1,640) | N/A | ($562) | N/A | ($1,958) | N/A | ($6,872) |
| Accumulated remeasurement gains, end of year | N/A | N/A | N/A | N/A | N/A | -N/A | N/A | N/A | -N/A | N/A |
See accompanying notes to financial statements.
The Grain Financial Protection Board (Funds for producers of grain corn, soybeans, canola, wheat)
Statement of cash flows - year ended March 31, 2019
| Fiscal year | Grain corn 2019 | Grain corn 2018 | Soybeans 2019 | Soybeans 2018 | Canola 2019 | Canola 2018 | Wheat 2019 | Wheat 2018 | Total 2019 | Total 2018 |
|---|---|---|---|---|---|---|---|---|---|---|
| Excess of revenue over expenses | $56,934 | $8,427 | $367,859 | $266,436 | $20,307 | $9,652 | $177,365 | $144,616 | $622,465 | $429,131 |
| Fiscal year | Grain corn 2019 | Grain corn 2018 | Soybeans 2019 | Soybeans 2018 | Canola 2019 | Canola 2018 | Wheat 2019 | Wheat 2018 | Total 2019 | Total 2018 |
|---|---|---|---|---|---|---|---|---|---|---|
| Accounts receivable | $35 | $3,615 | $7,747 | ($1,233) | ($895) | $708 | $2,153 | $2,077 | $9,040 | $5,167 |
| Accounts payable | ($8,842) | $6,201 | ($12,124) | $8,412 | ($1,199) | $1,321 | ($1,802) | $3,207 | ($23,967) | $19,141 |
| Fiscal year | Grain corn 2019 | Grain corn 2018 | Soybeans 2019 | Soybeans 2018 | Canola 2019 | Canola 2018 | Wheat 2019 | Wheat 2018 | Total 2019 | Total 2018 |
|---|---|---|---|---|---|---|---|---|---|---|
| Net proceeds (purchase) of investment | ($27,839) | $201,348 | ($511,139) | ($85,316) | ($45,598) | $66,844 | ($202,652) | ($9,649) | ($787,228) | $173,227 |
| Increase in cash | $20,288 | $219,591 | ($147,657) | $188,299 | ($27,385) | $78,525 | ($24,936) | $140,251 | ($179,690) | $626,666 |
| Cash, beginning of year | $288,951 | $69,360 | $579,488 | $391,189 | $79,956 | $1,431 | $312,904 | $172,653 | $1,261,299 | $634,633 |
| Cash, end of year | $309,239 | $288,951 | $431,831 | $579,488 | $52,571 | $79,956 | $287,968 | $312,904 | $1,081,609 | $1,261,299 |
The Grain Financial Protection Board (Funds for producers of grain corn, soybeans, canola, wheat)
Notes to the financial statements — year ended March 31, 2019
1. Establishment of the funds
The Grain Financial Protection Board (the board) was established in 1984 as an agency of the Ontario Government under the Farm Products Payments Act. It is an agency responsible for administering the funds for producers of grain corn, soybeans, canola and wheat (the funds). The funds were established to operate on a not-for-profit basis on behalf of the producers:
- Producers of grain corn— established November 3, 1984.
- Producers of soybeans — established November 3, 1984.
- Producers of canola — established July 22, 1989.
- Producers of wheat — established December 13, 2004. The Ontario Wheat Producers' Marketing Board made a $1 million non-recurring unrestricted contribution to establish the fund.
The purpose of the funds through regulations made under the Farm Products Payments Act is to protect producers (of grain corn, soybean, canola and wheat) against losses resulting from dealer payment default. Effective July 1, 2012, producers can be reimbursed 95% of an approved claim for any defaults by dealers. The board attempts to recover any claims paid from the dealers.
As a board-governed provincial agency, the Grain Financial Protection Board is exempt from income taxes.
2. Significant accounting policies
a) Basis of accounting
The financial statements have been prepared by management in accordance with Canadian Public Sector Accounting Standards (PSAS) for governments as recommended by the Public Sector Accounting Board of Chartered Professional Accountants of Canada (CPA Canada). The board has also elected to apply the section 4200 standards for Government Not-For-Profit Organizations. These financial statements are, in management's opinion, properly prepared within reasonable limits of materiality, statutory requirements and the framework of the accounting policies summarized below.
b) Revenue recognition
The funds' revenue includes fees from producers paid under the Farm Products Payments Act, investment income and claim recoveries. Fees from producers are paid to either the Ontario Canola Growers Association (OCGA) or the Grain Farmers of Ontario (GFO), as designated by Regulation. Revenue is recognized when fees from producers are receivable from the OCGA and GFO. Investment income is recognized as earned and amounts not yet received are included in the carrying value of investments. Claim recoveries are recorded when entitled to receive payment, unless uncertainty exists regarding the amounts and timing of the recovery. When uncertainty exists, claim recoveries are recorded when received.
c) Expense allocation
Expenses, including claims, are allocated to the four funds based on the proportionate value of each crop sold, with a minimum set at 5% (2018 – 5%).
d) Financial instruments
The funds' financial instruments consist of cash, investments, accounts receivable and accounts payable.
All financial instruments are recorded at cost or amortized cost unless management has elected to carry the instruments at fair value. Management has elected to record investments at fair value. Guaranteed Investment Certificates (GICs) are recorded at cost plus accrued interest, which approximates fair value.
Unrealized changes in fair value are recognized in the statement of remeasurement gains and losses until they are realized, when they are transferred to the statement of operations and fund balances.
All financial assets are assessed for impairment on an annual basis. When a decline is determined to be other than temporary, the amount of the loss is reported in the statement of operations and fund balances. Any unrealized gains and losses previously recognized in the statement of remeasurement gains and losses are reversed and recognized in the statement of operations and fund balances when realized.
The board is required to classify fair value measurements using a fair value hierarchy, which includes three levels of information that may be used to measure fair value:
- Level 1 — unadjusted quoted market prices in active markets for identical assets or liabilities
- Level 2 — observable or corroborated inputs, other than level 1, such as quoted prices for similar assets or liabilities in inactive markets or market data for substantially the full term of the assets or liabilities
- Level 3 — unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities
e) Use of estimates
The preparation of financial statements in conformity with PSAS requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses. Significant items subject to such estimates and assumptions include the carrying amounts of accounts receivable funds. Actual results could differ from those estimates.
3. Accounts receivable
Accounts receivable represent fees from producers due from the GFO or OCGA.
4. Investments
| 2019 | Fair value hierarchy | Grain corn | Soybeans | Canola | Wheat | Total |
|---|---|---|---|---|---|---|
| Financial institutions — GICs | Level 2 | $1,773,781 | $1,517,308 | $279,814 | $1,008,256 | $4,579,159 |
| Total short-term | N/A | $1,773,781 | $1,517,308 | $279,814 | $1,008,256 | $4,579,159 |
| 2019 | Fair value hierarchy | Grain corn | Soybeans | Canola | Wheat | Total |
|---|---|---|---|---|---|---|
| Long-term (1–5 years) Financial institutions — GICs | Level 2 | $3,988,129 | $3,461,033 | $713,324 | $2,706,284 | $10,868,770 |
| Total long-term | N/A | $3,988,129 | $3,461,033 | $713,324 | $2,706,284 | $10,868,770 |
| 2019 | Fair value hierarchy | Grain corn | Soybeans | Canola | Wheat | Total |
|---|---|---|---|---|---|---|
| Total investments | N/A | $5,761,910 | $4,978,341 | $993,138 | $3,714,540 | $15,447,929 |
| 2018 | Fair value hierarchy | Grain corn | Soybeans | Canola | Wheat | Total |
|---|---|---|---|---|---|---|
| Financial institutions — deposits held | Level 1 | $1,903,452 | $1,515,189 | $322,360 | $1,239,925 | $4,980,926 |
| Financial institutions — GICs | Level 2 | $3,830,619 | $2,952,013 | $625,180 | $2,271,963 | $9,679,775 |
| 2018 | Fair value hierarchy | Grain corn | Soybeans | Canola | Wheat | Total |
|---|---|---|---|---|---|---|
| Total | N/A | $5,734,071 | $4,467,202 | $947,540 | $3,511,888 | $14,660,701 |
There were no transfers of investments between Level 1 and Level 2.
5. Financial instruments risk management
a) Market risk
Market risk is the risk that changes in market prices will affect the fair value of reported assets and liabilities. Market factors include three types of risk: interest rate risk, currency risk and equity risk. The funds are not exposed to significant currency or equity risk as they do not transact in foreign currency or hold equity financial instruments. The funds operate within the constraints of the investment policy, which restricts the investments to highly liquid, high-grade instruments such as deposit notes, bonds, debentures, and other forms of indebtedness, issued by federal and provincial governments, and domestic financial institutions.
b) Interest rate risk
Interest rate risk refers to the adverse consequences of interest rate changes on the funds' financial position, operations and cash flow. Fluctuations in interest rates have a direct impact on the market valuation of the funds' fixed income securities portfolio. The average return on investments is 2.31% (2018 – 1.59%).
Although investments are generally held to maturity, realized gains or losses could result if liquidation of investments is required to meet obligations. There have been no significant changes from the previous year in the exposure to risk or to the policies, procedures and methods used to measure the risk.
c) Credit risk
Credit risk is the risk that other parties fail to perform as contracted. The funds are exposed to credit risk principally through balances receivable from the OCGA and GFO, as well as through its investment securities.
Credit risk on balances receivable arises from the possibility that the entities that owe money to the funds may not fulfill their obligation. Collectability is reviewed regularly and an allowance for doubtful accounts, if necessary, is established to recognize the impairment risks identified.
Credit risk on investment securities arises from the funds' position in term deposits, corporate debt securities, and government bonds. Board investment policy restricts the types of investments to high-grade Canadian debt instruments, which significantly reduces credit risk.
6. Related party transactions
Effective April 1, 2017, an updated Memorandum of Understanding between the board and the Minister of Agriculture, Food and Rural Affairs (OMAFRA) re-established that the funds are financially responsible for expenses related to governance, secretariat, financial services, and financial responsibility review. The board has entered into an agreement to acquire these services from Agricorp. These expenses are included in the statement of operations and fund balances and total $234,865 (2018 – $235,812).
Certain administrative expenses, specifically the cost of board meetings and investigative services, are absorbed by OMAFRA and legal services are provided by the Ministry of the Attorney General, which are not included in the statement of the operations and fund balances.
Footnotes
- footnote[1] Back to paragraph The numbers have been rounded-up to the nearest dollar for ease of reporting purposes only.
- footnote[2] Back to paragraph Expenses included in financial responsibility review includes the cost of determining financial responsibility, one FRRC member and other administration (i.e. bank charges).
- footnote[3] Back to paragraph Expenses included in FRRC are invoices from the firm of Graham, Scott and Enns LLP and from Gee, Lambart and Courtney less the revenue recovered from other revenue (e.g. dealer FRRC fees).